Autumn Statement: Boost for infrastructure gets industry's thumbs up

Published: 29 November, 2011

LONDON: The construction industry's main bodies welcomed the Chancellor's announcement confirming an increase for investment in infrastructure projects in today's Autumn Statement, even though overall capital spending continues to fall.

Construction Products Association chief executive Michael Ankers said: "Improving the quality of our infrastructure has a key part to play in raising business competitiveness and stimulating economic growth and it is encouraging that the government has recognised this. Schemes like the improvement to the A14 trunk road will improve access to key ports from our manufacturing heartland and help our export drive. At a time when construction output is falling and forecast to continue to do so for the next couple of years, the additional investment on infrastructure will help create new jobs and generate as much as £75bn of economic activity across the economy as a whole.

"Today's announcements do little to reverse the sharp fall in government capital spending – from £62bn in 2010-11 to £45bn in 2013-14. The most important step for the long term is to underpin investment on infrastructure with private finance and so the announcement that an additional £20bn of funding from pension funds and capital markets is particularly welcome. Funding of this kind will help create a long-term sustainable framework for investment in our infrastructure which is set apart from the vagaries of government spending cycles," said Mr Ankers.

Turning to other measures in the Chancellor's statement, Mr Ankers said: "Companies in our sector will benefit from the additional rebate on the Climate Change Levy, as well as measures to reduce the cost of the EUETS and the Carbon Price Floor. But, these are only the first steps and we want to see help for companies that use gas as their major source of energy. In particular, they would benefit from enhanced capital allowances for investments that improve energy-efficiency and the treatment of process emissions in a similar way to other EU Member States."

John Cridland, the CBI's director-general, said: "This autumn statement works with the realities of today and provides an imaginative framework for UK businesses as it strives to secure growth and jobs. This is 'Plan A plus' in all but name.

"The downgraded forecasts and outlook were no surprise, but the Eurozone crisis is still hanging over us.

"We particularly welcome the new emphasis on capital spending, and the measures to leverage private sector investment on infrastructure for roads and energy.

"The National Loan Guarantee scheme is a necessary pre-emptive strike to safeguard bank lending to SMEs. With the pressure on bank balance sheets, this is practical and immediately available help.

"We are delighted that our campaign to gain support for medium-sized businesses has been heeded and we warmly welcome the Business Finance Partnership and measures to support exports.

"Unfreezing the housing market is an important step on the confidence-building ladder. Mortgage indemnity guarantees are the best way to bridge the problem of loan-to-value ratios."

Phil Orford, chief executive of the not-for-profit small business body the Forum of Private Business, said: "We welcome the announcement of 50% income tax relief and a one-year capital gains holiday for those investing in start ups under the Seed Enterprise Investment Scheme (SEIS), but the Government should have acted to encourage private lenders too.

"Small firms need a range of funding options, and equity finance is certainly one of these, but lending at interest remains their preferred route by far."Combined with these tax breaks, the Government's new credit easing scheme and an extended Enterprise Finance Guarantee (EFG), providing incentives for new lenders to compete with the high street banks would be more likely to boost competition in small business borrowing markets, driving up levels of service and bringing down costs. It is a shame this has not happened."

In its submission to the Chancellor ahead of the Autumn Statement, the Forum called for tax incentives for private lenders similar to the 30% tax relief available for equity investors under the Enterprise Investment Scheme (EIS).

Mr Orford added: "WE have seen some tentative steps towards easing fuel duty and business rates, but we need to go much further and introduce real tax reforms in order to help them to grow and create jobs."

Murray Rowden, managing director of infrastructure at the global programme management consultancy Turner & Townsend, commented: "Investing in infrastructure is an investment in Britain's future growth, and the right project will generate both wealth and jobs in its own right.

"Mr Osborne said he has accounted "pound for pound" for all of the £5bn of public money due to be injected into infrastructure building over the next three years.

"But, if the Government is to find the extra funds needed to meet the vast capital cost involved, it will need to perform a twin feat - of both creativity and persuasion.

"PFI, once the darling of the Labour government, is now the funding model which dare not speak its name.

"In its stead the Government is proposing to use private pension funds as a source of long-term funding. It's a logical and tested way of keeping much of the cost off the government's balance sheet – and getting a significant chunk of the money up front.

"It should be an easy sell too. From the pension funds' perspective, the right projects can be very appealing – as they provide a long-term, steady income stream and low risk. The smaller projects will provide a tougher challenge, as investors in these will often want to see quicker returns in return for higher risk.

"The most likely source of this sort of funding will be a retooled version of PFI."

Simon Rubinsohn, RICS' chief economist said: "Today's figures from the OBR are disappointing and serve to emphasise how desperately the Government needs a positive strategy that delivers sustainable growth quickly to the UK economy.

"It is essential that government and investors understand the specialist expertise that small surveying businesses can offer these infrastructure projects.

"Ensuring that small businesses are able to bid competitively for this work will benefit both the project itself and the wider economy. Efficient, effective and sustainable procurement and delivery, throughout the whole lifecycle of the project will also be vital.

Scottish Building Federation chief executive Michael Levack said: "Breathing life back into private sector construction must be a top priority as we try to build a sustainable economic recovery. I hope the Scottish Government will take the opportunity – and be given the freedom – to prioritise any additional funding for capital projects released through Barnett consequentials to kick-start projects that are shovel-ready but currently stalled due to a lack of bank finance."

Paul King, chief executive of the UK Green Building Council said: "Buried in the Autumn Statement is confirmation that government is committing £200m over two years to incentivise take-up of the Green Deal. That's great news and a huge victory for DECC, although we still have to wait until next year for the detail.

"However, we're kidding ourselves if we think George Osborne has seen the light. References to sustainability in the National Infrastructure Plan don't seem to be part of any kind of overarching strategy. This was an opportunity missed to put green growth and green jobs at the heart of economic recovery."

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